Key euro-priced bank-to-bank lending rates ticked down on Friday, pushed down by excess liquidity and the ECB's promise to keep providing banks with unlimited cash until at least April. The three-month Euribor rate - traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks' appetite for lending - fell to 1.014 percent from 1.015.
Six-month rates fell to 1.243 percent from 1.248 percent, and longer-term 12-month rates fell to 1.521 percent from 1.526 percent, but shorter-term one-week rates jumped to 0.803 percent from 0.643 percent. Overnight rates fixed at 0.356 percent on Thursday.
Bank-to-bank 3-month lending rates traditionally sit just above the ECB's headline rate, but the ECB's tactic of lending out unlimited cash during the financial crisis had long kept them well below the benchmark rate. The 3-month Euribor rate broke above the European Central Bank's 1.0 percent benchmark rate for the first time in well over a year in October, marking a milestone in money markets return to normality.
By the start of next year, markets will almost be back to the pre-crisis range of ECB funding on offer. The bank's three-month operations will again be the longest maturity on offer, although banks will still have the security of unlimited access to funds as well the extra option of 1-month funding. In the run-up to the deadline, excess liquidity in money markets has climbed to over 90 billion euros, the highest level since the last major ECB payback deadline in late September.
The ECB threw out original plans to continue with its exit from crisis support measures earlier this month, deciding to keep providing unrestricted funding to money markets until at least mid-April. It also kept interest rates on hold at a record low of 1 percent as expected. Economists currently expect the bank to keep them there until the fourth quarter of next year.
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